Aspen Valley Hospital to pose $50M bond issue to voters
August 21, 2010
ASPEN – The Aspen Valley Hospital District will ask voters in November to authorize borrowing $50 million to help fund a planned $73 million expansion and renovation project.
The district’s board of directors voted 4-0 on Friday to put the ballot question before voters on Nov. 2, along with a second measure proposing the “deBrucing” of the district – in essence, exempting it from state revenue limitations. Board chairman John Sarpa was called out of town and did not attend the special meeting.
The board agreed to ask voters for permission to issue general obligation bonds for the expansion after a survey of district voters indicated the request would win approval, though the polling did not indicate overwhelming support.
The survey of 306 voters, considered a representative sample in a gubernatorial election year, indicated a 5-to-3 margin of support for a question proposing $50 million in debt, with a total repayment cost of $87 million. In response, 56 percent said they would vote yes, 35 percent said they would vote no, and 9 percent weren’t sure, according to bond advisor Terry Casey of RBC Capital Markets in Denver, who presented the survey results to the board.
“It’s, I won’t say a comfortable margin, but nevertheless it is a positive margin of five to three,” he said.
When respondents were told the bond issue would result in an additional $36 per year in property taxes for a $500,000 home, 62 percent said they would vote yes on the bond issue, 34 percent said they would vote no, and 5 percent were undecided, Casey said.
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In response to another question, 81 percent of the respondents rated the quality of care at AVH as excellent or good.
“Those are very, very impressive results,” he said.
However, Casey said the survey results don’t necessarily point to an easy campaign, and hospital CEO David Ressler agreed.
“It suggests this is a community that will still need to be educated about what it is we’re trying to accomplish,” Ressler said. “I think the master facilities plan has merit. I think it’s the right thing for the future of this community.”
Phase 2 of the plan has already received City Council approval. It includes the renovation of all the patient rooms at AVH into private rooms; expansion of the emergency room and other patient areas, including physical therapy and cardio-pulmonary rehabilitation; construction of a new main entrance; the addition of medical office space for physicians; and the addition of a parking garage and employee housing.
The election campaign is the logical next step to get the community behind the project, said board member Dr. Mindy Nagel.
“I think this is a good next step. I think it’s one we need to take,” board member Lee Schumacher agreed.
In addition to the general obligation bonds, the hospital intends to issue $25 million in revenue bonds to pay for the $73 million phase 2. Those bonds, repaid through hospital revenues, don’t require voter approval.
If voters approve the borrowing, the hospital also needs to “deBruce,” Casey said. State constitutional limitations on revenue growth have not applied to the hospital district until now because less than 10 percent of its revenues have come from taxes. However, in 2011, for one year only, the borrowed money will bump it above that threshold.
The district would not be allowed to keep all of the revenues it takes in from patient services if it isn’t exempted from the limitations, Casey explained. It’s a step most other local taxing districts have already undertaken, he said.
Though the economy is a concern, and survey respondents were polled on that as well, the hospital district is prompted to seek voter authorization to borrow money this fall instead of waiting because of something else that’s on the ballot. One of three proposed state constitutional amendments – Amendment 61 – would affect the district’s future ability to take on debt if it passes, according to Casey.
The hospital is considering a 20-year repayment of the general obligation bonds, but Amendment 61 would require repayment within 10 years. That means a lower interest rate, but significantly higher debt payments, he said.
Amendment 61 would double the impact of paying off the debt for taxpayers, Casey said.
In all, the hospital has planned a four-phase expansion and renovation, of which the second phase is by far the largest. The first phase, revamping obstetrics, is already done. The 70,000-square-foot hospital would roughly triple in size, not including the parking garage, when the final phase is complete.